Investing Blog

US spent less; jobs on the way?

Welcome to nonfarm payroll week. Before we get to Friday, there are some other economic reports that may also have some impact on investing.

For instance, today we learned that Americans, collectively, spent a little less and earned a little more in the month of March.

The personal income and outlays report from the Bureau of Economic Analysis showed spending down 0.3 percent. Incomes increased 0.4 percent, and disposable personal incomes increased 0.4 percent. Less spending and higher incomes combined to push the personal saving rate up a smidge -- it's now 3.8 percent, up from 3.7 percent in March.

Inflation may be eating some of the recent gains in income, according to a daily newsletter from High Frequency Economics.

Nominal income growth is now running at a steady 0.3-to-0.4 percent per month pace, thanks to the upturn in payroll growth, but the rise in headline inflation due to energy prices meant real Q1 incomes rose only 1.3 percent annualized.

Tuesday

Tomorrow, the manufacturing report from the Institute for Supply Management, or ISM, will be released. The report measures activity in the manufacturing sector. Any reading above 50 indicates expansion, and the consensus forecast, according to Marketwatch.com, is 53 percent; the Purchasing Manager's Index, or PMI, was 53.4 percent in March.

Wednesday

On Wednesday, the ADP employment report will be released. It's generally read as a bellwether for the employment situation summary released at the end of the week.

Thursday

The volatile initial jobless claims number will come out on Thursday. The number of initial claims for unemployment benefits were disappointingly high through April after hitting a low point at the end of March.

The forecast from High Frequency Economics is for a slight drop from last week's 388,000.

Friday

Finally, the report everyone's been waiting for comes out on Friday, the employment situation summary from the Department of Labor's Bureau of Labor Statistics.

It's actually two reports: the nonfarm payroll report, or establishment survey, and the household survey. The payroll survey estimates the number of jobs that aren't on farms from a survey of 400,000 businesses. The household survey questions 60,000 households.

The unemployment rate comes from the household survey while the number of jobs added each month is derived from the establishment survey.

This is how they differ according to the Federal Reserve Bank of San Francisco Economic Letter from August 2004:

The payroll survey counts the number of jobs, while the household survey counts the number of employed individuals. Therefore, a person with multiple jobs will be counted several times in the payroll survey but only once in the household survey. Second, their scopes are different; while the payroll survey covers only wage and salary workers on nonfarm payrolls, the household survey covers those individuals as well as agricultural workers, the self-employed, workers in private households, unpaid family workers, and workers on unpaid leaves. Finally, payroll employment includes wage and salary workers under the age of 16, while the household survey does not.

Hopes are high for an improvement over last month's nonfarm payroll report, which found only 120,000 jobs added in March.

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